Investment Companies Quarterly Roundup
Kindly sponsored by Baillie Gifford
Over the third quarter, we published notes on India Capital Growth, Jupiter Emerging & Frontier Income, Montanaro European Smaller Companies, JLEN Environmental Assets, Civitas Social Housing, JPMorgan Russian Securities, International Biotechnology Trust, Aberdeen Emerging Markets, Seneca Global Income & Growth, Standard Life Investments Property Income and Strategic Equity Capital. We also launched a monthly roundup on the real estate sector. You can read all these notes by clicking on the links above or by visiting www.quoteddata.com.
In this issue
- Performance data – There was palpable shift in sentiment over the third quarter with the cautionary undertone perhaps best reflected by gold’s resurgence. Ongoing trade jockeying between the US and China did not help the mood and neither did the Argentine debt default in August. At the real economy level, manufacturing output has been trending lower across some of the major global economies. Demand for safe-haven exposure drove up the price of gold, which benefitted Golden Prospect Precious Metals and UIL;
- Money in and out – Fundraising over the summer period was quiet. There was one new issue with JPMorgan launching Global Core Real Assets, raising £148.9m;
- Discounts/premiums – Doric Nimrod Air Three’s share price was quite volatile over August and September, much more so than its sister funds. It might be that a large shareholder is looking to exit;
- Major news stories – Woodford Patient Capital reported results. Earlier in the quarter, WPCT slashed its NAV on write downs. Elsewhere, We had inaugural results from Ashoka India Equity and US Solar.
Q3’s biggest movers in price and NAV terms are shown in the charts below.
Looking first at the positive moves
- CATCo Reinsurance Opportunities was the standout, delivering a 54.9% cumulative price return. It has been returning capital to shareholders as part of a wind down of the fund, following extreme hurricane claims.
- Gold found a new lease of life over recent months as a safe haven. This helped Golden Prospect’s NAV and share price. UIL similarly benefitted with gold-related investments accounting for close to 20% of its portfolio.
- Triple Point Social Housing’s share increase reflected a tempering in concerns over the Regulator of Social Housing’s take on the lease-based business model.
- The Doric Nimrod aircraft leasing funds NAVs were all up. The dust has settled somewhat after Airbus announced plans earlier this year to cull production of A380s.
- Bill Ackman’s Pershing Square has benefitted from the ongoing strength of its second largest holding, the fast-casual restaurant company Chipotle Mexican Grill. Chipotle’s shares are up by over 80% over the past year.
- Ecofin Global Utilities & Infrastructure had another good quarter. Since its launch nearly three years ago, Ecofin’s discount has remained stubbornly high (in the 10-15% range) despite solid performance and reliable income.
- VietNam Holding’s NAV increased by 11.7% over Q3. The Vietnamese stock market has performed strongly over the year-to-date and it is worth noting that in the wake of the US / China trade war, Vietnamese exports to the US are up substantially.
On the negative side
The crisis continued at Woodford Investment Management over the third quarter; elsewhere cyclical sectors, notably commodities, struggled.
- Woodford Patient Capital’s (WPCT) NAV was down after it wrote down values of some of its holdings, while the shares continued to fall. In its half-year results release, WPCT’s board said it was continuing to evaluate the position of the manager and remains in dialogue with other potential managers.
- Adamas Finance Asia’s sharp price saw its discount widen to 65.9% – making it the second cheapest company behind Dolphin Capital in the sector (counting market caps above £15m). Some of the reasons behind this are thought to include relatively low transparency from the fund, its track record, an overly concentrated portfolio and the presence of a dominant shareholder (reducing liquidity in the shares).
- Riverstone Energy announced a 26% drop in its NAV over August and its shares moved to trading on a 35% discount.
- Lindsell Train shed nearly 29% in price terms, as its premium to NAV continued to narrow after its warning on the risks of buying at rich premiums. The re-pricing followed manager Nick Train’s warning in the June annual report, over the risk of buying the fund at the more than 90% premium it previously traded at.
- Macau Property Opportunities’s discount has widened as sentiment towards the VIP gaming market, which is closely linked to high-end property, has soured. Property speculation cooling measures and tighter capital controls have significantly impinged on high-end transaction volumes.
- After performing well over the first two quarters, Latin American funds struggled in August, with Brazil’s fires and an Argentine default weighing on BlackRock Latin American.
- Hadrian’s Wall Secured, which specialises in commercial loans to small and medium-sized businesses, saw its price fall by 15.1% despite a 1.4% increase in the NAV. was down 13.7% in price terms. The reaction is thought to have been a knock-on from provisions the fund made in May (the provision then was 1.9% of NAV) against two loans to companies producing wood pellets. Some of the reaction can also be ascribed to nervousness around the sector, following Funding Circle’s decision to wind up earlier in the year.
Discounts and premiums
Discounts widened over the third quarter as the market removed capital from riskier asset classes. They have widened over a 12 month horizon too. The table below shows the top 10 movers in either direction over quarter (more or less expensive relative to NAV), in order of most expensive to least expensive.
Getting more expensive
- CATCo’s discount narrowed after peaking at around 50% – the shares traded at a 20+% premium as recently as December 2017.
- We touched on UIL and Triple Point Social Housing in the performance section. UIL is one of the last remaining split-capital trusts.
- Globalworth Real Estate describes itself as a leading office investor in Central and Eastern Europe. The company has been actively expanding, notably completing acquisitions for two buildings in Poland worth €113.2m in July.
- We discussed the catalysts behind the moves in Lindsell Train, Riverstone Energy, Hadrian’s Wall Secured and Adamas Finance Asia in the performance section
- Elsewhere, Doric Nimrod Air Three’s share price was quite volatile over August and September, much more so than its sister funds. It might be that a large shareholder is looking to exit.
- JPMorgan Global Core Real Assets is targeting the infrastructure, transport and real estate sectors, and is aiming for total annual returns in the 7-9% range.
- Elsewhere, Merian Chrysalis led the way with a £175m placing. Sequoia Economic Infrastructure, raised £138.8m through a placing of its own, lifting the shares on the back of some of the firmest trading volumes the shares have seen. Target Healthcare REIT also came to market with a placing, raising £80m.
- The largest raise in August was Hipgnosis Songs’s £51.1m placing (the original target was £72m), reflecting the holiday period pause.
- NB Global Floating Rate Income is a regular feature in the table. Elsewhere, Edinburgh Investment continued to buyback, leading to its discount narrowing. The discount had earlier been widening since April, despite buybacks.
- Pershing Square has embarked on a major buyback programme. Leaf Clean Energy was the other company to return more than £50m.
Major news stories over Q3
- Woodford Patient Capital reported results. Earlier in the month, WPCT slashed its NAV on write downs
- Exposure to Pakistan undermined Aberdeen Frontier Markets
- We had inaugural results from Ashoka India Equity and US Solar
- SDCL Energy Efficiency Income announced a EUR64m Spanish deal
- One of Middlefield Canadian Income REIT’s holdings was subject to a $4.7bn Blackstone bid
- Adamas Finance Asia provided an update on its largest holding, Future Metal
- Hipgnosis said it was considering a £300m C share issuance as it neared a move to the main market
- BioPharma Credit said would spend its $600m cash pile by year end and made a $150m loan to OptiNose
- Oakley Capital bought Seven Miles GmbH and invested in Alessi
- JLEN Environmental bought an anaerobic digestion plant in Norfolk
- Amedeo Air Four Plus discussed its A380 fleet
- Symphony International added to its India exposure by buying a minority stake in Good Capital Partners (GCP). GCP founded Investopad in 2014, laying the foundations for a dynamic ecosystem of technology startups across India
- 3i Infrastructure closed a deal to acquire Ionisos, the third largest cold sterilisation provider globally, for around €220m
- Renewables Infrastructure looked to raise capital to expand in Europe
- Hedge fund Third Point said it wanted to narrow its discount with a US$200m buyback programme
- QuotedData took a closer look at outperforming Vietnam
- We had fundraising news from JPMorgan Global Core Real Assets and Merian Chrysalis
- P2P Global Investments changed its name to Pollen Street Secured Lending
- JPMorgan Brazil asked investors to support continuation
- AEW Long Lease REIT changed its mind about being taken over
- QuotedData sent an analyst along to a meeting with Bill Ackman (manager of Pershing Square Holdings)
- QuotedData visited Bluefield Solar’s Elms farm
- In trying to arrest its long-standing discount, Boussard & Gavaudan announced proposals that were unfriendly to smaller retail investors
- QuotedData took a closer look at gold after its best month in years
- JPMorgan Global Convertible’s board decided against a shareholder continuation vote, preferring to press forward with proposals for an orderly liquidation
- Hammerson exceeded its £500m disposal target with the sale of a retail park
- Tritax EuroBox increased its bank facility by EUR125m. The company also bought two facilities in Germany
- Results from Ceiba showed Trump’s impact on Cuba
- Phoenix Spree Deutschland agreed a new €240m loan facility
- Irish Residential Property REIT got planning for a 428-unit development in Dublin
- Results from Intu Properties reflected wider retail woes
- Russia-focused Raven Property revalued its portfolio up as the economy’s resilience feeds through to real estate
- Secure Income REIT sold its hospital portfolio for £347m
- Real Estate Investors continued to benefit from the vibrant Midlands economy
Managers and fees:
- ScotGems’s manager resigned
- CQS New City High Yield adjusted its fee calculation
- It was announced that Martin Hudson, veteran manager of Mercantile, was retiring from JPMorgan Asset Management
Have you checked out the Events section of our website? Here is a selection of what’s coming up.
- Pimfa Annual Summit 2019, 16 October 2019
- Renewables Infrastructure EGM 2019, 17 October 2019
- Scottish Mortgage Investor Forum, 22 October 2019
- Personal Investment Live – Festival of Enterprise, 23 October 2019
- Standard Life UK Smaller Companies AGM 2019, 23 October 2019
- City of London Investment Trust AGM 2019, 24 October 2019
- The London Investor Show, 25 October 2019
- Tufton Oceanic Assets AGM 2019, 25 October 2019
- Ashoka India Equity AGM 2019, 30 October 2019
- JPMorgan Mid Cap AGM 2019, 30 October 2019
- Murray Income Trust AGM 2019, 5 November 2019
- AEW UK Long Lease AGM 2019, 5 November 2019
- GCP Student Living AGM 2019, 6 November 2019
- Gulf Investment Fund AGM 2019, 8 November 2019
- Pacific Horizon AGM 2019, 12 November 2019
- Mid Wynd International AGM 2019, 12 November 2019
- JPMorgan Global Growth & Income AGM 2019, 12 November 2019
- JPMorgan Emerging Markets AGM 2019, 13 November 2019
- Investing in the Age of Longevity, 13 November 2019
- New Star Investment Trust AGM 2019, 14 November 2019
- Jupiter European Opportunities AGM 2019, 14 November 2019
- Standard Life UK Smaller Companies presentation, 20 November 2019
- Investment Company AGM 2019, 21 November 2019
- Crystal Amber AGM 2019, 22 November 2019
- Money Week Wealth Summit, 22 November 2019
- TR European AGM 2019, 25 November 2019
- Personal Finance Society Annual Conference, 28 November 2019
- Ruffer Investment Company AGM 2019, 5 December 2019
- Aberdeen Frontier Markets AGM 2019, 10 December 2019
- Master Investor – the UKs largest private investor show, 28 March 2020
The legal bit
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